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World’s factories are stalling as tariff pain spreads

The almost universally bleak PMI figures out on Monday confirm the trade war’s deepening bite

02 September 2019 - 18:27 Agency Staff

Picture: BLOOMBERG

New York — The world’s manufacturing powerhouses sent a simple message on Monday: They’re in the doldrums and could be there for a while.

A day after the US and China put more tariffs on each other, key gauges for activity in August across the world confirmed the trade war’s deepening bite.

Manufacturing purchasing manager indexes for Japan, South Korea and Taiwan remained in negative territory. Indonesia’s slipped to its lowest since July 2017 and the Philippines, Thailand, and Myanmar all expanded more slowly.

India’s factory gauge slid to its weakest in more than a year — the Nikkei Manufacturing Purchasing Managers’ Index (PMI), compiled by IHS Markit, declined to 51.4 in August from July’s 52.5, its weakest since May 2018.

Similarly bleak were PMI figures for the eurozone (where manufacturing activity contracted for a seventh month in August and IHS Markit’s August final manufacturing PMI was 47), the UK (which contracted in August at the fastest rate in seven years, with the IHS Markit UK PMI index diving to 47.4 in August,) and SA.

Germany’s export-dependent manufacturing sector remained in contraction in August, a survey showed on Monday, as weaker demand pushed companies to scale back production and cut jobs. IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose slightly to 43.5, remaining below the 50.0 mark separating growth from contraction for an eight month in a row.

In one brighter spot, factory activity in France returned to growth in August as manufacturers saw output and client demand pick up, a monthly survey showed on Monday. Data compiler IHS Markit said its purchasing managers index for the sector rose to 51.1 from 49.7 in July, breaking through the 50-point threshold between an expansion and a contraction of activity. The result also topped a preliminary reading of 51.0.

Mexico’s manufacturing industry contracted at the sharpest pace since 2011.

While China’s Caixin Media and IHS Markit PMI stayed in expansion mode, the nation’s official manufacturing PMI dropped to 49.5, according to data released Saturday.

Looking ahead, the dogfight between the world’s two biggest economies looks to make matters worse.

Since the Trump administration put tariffs on roughly $110bn in Chinese imports on Sunday, commentaries in Chinese state media shrugged off the move and focused on the pain that US consumers are likely to feel.

The new levies are “a turning point in the trade war” with the US, according to an editorial in the Communist Party’s tabloid Global Times. The report said the tariffs on daily goods are to hit US consumers directly, and it also showed Washington is almost at the end of its wits.

“The Trump administration has shot Americans in the foot. When more and more Americans feel the pain, maybe it will be time for Washington to recover rationality,” the editorial said.

A 15% tariff that went into effect September 1 on about $112bn of goods imported from China will start pushing up prices of clothing, shoes and other consumer goods arriving at US ports this week.